7 


%u  tlxjc  Circuit  (&anv t  of  the  jltates 

FOR  THE  SOUTHERN  DISTRICT  OF  NEW  YORK. 


United  States  of  America, 
Complainant, 

YS. 

The  American  Tobacco  Company, 
and  Others, 

Defendants. 


To  the  Honorable  the  Judges  of  the  Circuit  Court  of 
the  United  States  for  the  Southern  District  of 
New  York  : 

The  United  States  of  America,  by  Henry  A.  Wise,  its  at¬ 
torney  for  said  district,  acting  by  direction  of  the  Attorney 
General  of  the  United  States,  answering  the  petition  of  the 
American  Tobacco  Company  and  all  the  other  defendants  to 
the  above  entitled  cause,  except  the  Imperial  Tobacco  Com¬ 
pany  (of  Great  Britain  and  Ireland),  Limited,  United  Cigar 
Stores  Company  and  R.  P.  Richardson,  Jr.,  and  Company, 
Incorporated,  filed  in  this  court  October  16,  1911,  and  by 
way  of  cross-petition,  respectfully  shows  : 

I.  Under  the  decision  of  the  Supreme  Court  it  is  made  the 
duty  of  this  court,  either  by  way  of  an  injunction  restrain¬ 
ing  the  movement  of  the  products  of  the  combination  in  the 
channels  of  interstate  or  foreign  commerce,  or  by  the  ap¬ 
pointment  of  a  receiver,  to  give  effect  to  the  requirements 
of  the  Antitrust  Act,  unless  within  the  time  specified  a  con- 

,  CO 


2 


dition  of  disintegration  in  harmony  with  the  law  is  brought 
about,  either — 

(1)  As  the  consequence  of  the  action  of  the  court  in  as¬ 
certaining  and  determining  upon  some  plan  or  method  of 
dissolving  the  combination  and  recreating,  out  of  the  ele¬ 
ments  now  composing  it,  a  new  condition  which  shall  be 
honestly  in  harmony  with  and  not  repugnant  to  the  law  or — 

(2)  By  accepting  a  plan  agreed  upon  between  the  parties. 

And  the  matter  is  left  to  this  court  to  work  out  a  compli¬ 
ance  with  the  law  without  unnecessary  injury  to  the  public 
or  the  rights  of  private  property. 

Obviously  the  effect  of  any  plan  of  disintegration  sub¬ 
mitted  to  the  consideration  of  the  court  must  be  more  or 
less  a  matter  of  conjecture,  and  it  is  impossible  for  the 
court  to  determine  in  advance  whether  or  not  a  plan  which 
proposes  to  restore  competitive  conditions  will  actually 
accomplish  the  purpose  intended.  Any  decree  ascertaining 
and  determining  upon  a  plan  should  therefore  reserve  to  the 
Government  the  right,  at  any  time  within  five  years  from  date 
of  entry,  to  apply  to  the  court  for  other  and  further  relief 
upon  a  showing  that,  as  a  matter  of  fact,  such  plan  has  not 
resulted  in  creating  a  new  condition  which  shall  be  honestly 
in  harmony  with  and  not  repugnant  to  the  law.  To  that 
end,  as  well  as  for  the  other  purposes  hereinafter  expressed, 
each  and  every  of  the  new  corporations  proposed  to  be  or¬ 
ganized  for  the  purpose  of  carrying  out  tne  plan  should  be 
brought  in  as  a  party  to  this  suit,  in  order  to  be  subjected 
to  the  jurisdiction  of  the  court  and  bound  by  its  decree. 

II.  The  following  conditions  to  the  approval  of  the  plan 
submitted  or  of  any  other  plan  should  be  imposed,  viz.  : 

1.  That,  during  a  period  of  not  less  than  five 
years,  no  one  of  the  corporations  among  which  the 
properties  and  businesses  now  in  the  combination 
are  to  be  distributed,  shall  have  any  officer  or  di- 


3 


rector  who  is  also  an  officer  or  director  in  any  other 
of  such  corporations. 

2.  That  the  plan  be  so  modified  that  the  principal 
company  shall  dispose  of  and,  when  the  disintegra¬ 
tion  is  complete,  shall  not  retain  any  of  the  stocks 
of  any  of  the  accessory  companies,  and  each  of  the 
accessory  companies  shall  dispose  of  all  of  the  stocks 
held  by  it  of  the  principal  and  of  each  of  the  other 
accessory  companies  held  by  it. 

3.  That  no  one  of  the  corporations  among  which 
the  property  and  businesses  now  in  the  combination 
are  to  be  distributed  shall,  during  the  same  period, 
retain  or  employ  the  same  agency  for  the  purchase 
of  tobacco  leaf  or  other  raw  material,  or  for  the 
sale  of  tobacco  or  other  products,  as  that  of  any 
other  of  such  corporations. 

4.  That  no  one  of  the  corporations  among  which  the 
property  and  businesses  now  in  the  combination  are 
to  be  distributed  shall  retain  or  employ  the  same 
clerical  or  other  organization,  or  occupy  the  same 
office  or  offices  as  any  other  of  the  said  corporations. 

5.  That  no  one  of  the  corporations  among  which 
the  properties  and  businesses  now  in  the  combination 
are  to  be  distributed  shall  retain  and  hold  capital 
stock  in  any  other  corporation,  any  part  of  whose 
stock  is  also  retained  and  held  by  any  of  the  other 
of  the  corporations  among  ivhich  such  properties 
and  businesses  are  to  be  distributed,  or  shall  pur¬ 
chase  or  acquire  any  stock  in  any  other  of  such  cor¬ 
porations. 

6.  That  no  one  of  the  corporations  among  which 
the  properties  and  businesses  now  in  the  combi¬ 
nation  are  to  be  distributed  shall,  during  a  period  of 
five  years,  directly  or  indirectly  acquire  any  stock  in 
any  one  of  the  others  of  said  corporations,  or  pur- 


4 


chase  or  acquire  the  property  or  business,  or  both, 
of  any  other  of  said  corporations. 

7.  To  the  end  that  the  twenty-nine  individual 
defendants  in  this  suit  shall  not  increase  their 
control  over  any  of  the  corporations  among 
which  the  properties  and  businesses  now  in 
the  combination  are  to  be  distributed,  pursu¬ 
ant  to  the  plan,  that  such  defendants  be 
severally  enjoined  from,  at  any  time  within 
five  years  from  the  date  of  the  decree,  acquiring, 
directly  or  indirectly,  the  legal  or  equitable  owner¬ 
ship  of  any  amount  of  stock  in  any  one  of  said  cor¬ 
porations  in  addition  to  the  amounts  which  they  will 
respectively  hold  if  and  when  the  plan  shall  have 
been  carried  out  as  proposed. 

8.  That  the  preferred  stock  of  the  American  Cigar 
Company,  aggregating  in  book  value  $2,530,216.69, 
held  by  American  Snuff  Company,  and  the  stock  and 
bonds  of  American  Tobacco  Company,  held  by 
American  Snuff  Company,  referred  to  on  page  11  of 
the  plan  (foot-note  A),  be  sold  or  otherwise  disposed 
of  within  one  year,  instead  of  three  years,  as  pro¬ 
posed  in  the  plan,  with  leave  to  defendants  to  apply 
to  the  court  to  extend  such  period  for  not  more  than 
two  years. 

9.  That,  in  the  distribution  of  the  properties  and 
businesses  now  held  in  the  combination  pursuant  to 
the  plan  of  disintegration,  no  corporation  shall  be 
allowed  to  acquire  property,  tangible  or  intangible, 
which  would  invest  it  with  as  much  as  forty  per  cent, 
in  volume  or  in  value  of  any  particular  line  of  the 
tobacco  business. 

10.  That  the  stocks  of  Liggett  and  Myers  Tobacco 
Company  and  P.  Lorrillard  Company,  provided  to  be 
sold  in  accordance  with  the  plan,  be  deposited  with  the 


5 


Guaranty  Trust  Company  of  New  York,  as  the  agent 
or  depository  of  this  court  in  this  cause,  for  the 
purposes  specified  in  the  plan,  and  that,  at  the  end 
of  the  period  designated,  the  court  make  an  order 
for  their  further  disposition.  That,  in  the  mean¬ 
time,  no  voting  right,  with  respect  to  such  stock, 
shall  be  exercised  except  as  the  court  may  from  time 
to  time  order. 

11.  That  all  covenants  in  any  way  restricting  the 
right  of  any  company  or  individual  in  the  combina¬ 
tion  to  buy,  manufacture  or  sell  tobacco  or  its 
products  should  be  rescinded  by  the  affirmative 
action  of  the  respective  parties  thereto  who  are  par¬ 
ties  to  this  suit. 

12.  That  the  action  proposed  in  subdivision  C  of 
the  plan,  on  page  6,  terminating  certain  covenants, 
be  amplified  so  as  to  include  like  action  with  respect 
to  all  covenants  not  only  concerning  the  tobacco 
business,  but  any  other  business  which  is  in  any  way 
embraced  in  the  combination. 

13.  That  all  contracts  or  covenants  between  the 
American  Tobacco  Company,  or  any  other  companies 
in  the  combination,  and  the  British-American  To¬ 
bacco  Company,  giving  to  the  latter  company  the  ex¬ 
clusive  right  to  manufacture  or  sell  brands  belonging 
to  any  of  the  companies  in  the  combination,  be  re¬ 
scinded  or  otherwise  terminated. 

14.  That  the  stock  of  the  United  Cigar  Stores 
Company  be  sold  and  distributed  to  parties  other 
than  the  twenty-nine  individual  defendants  or  others 
of  the  common  stockholders  of  the  American 
Tobacco  Company,  to  the  end  that  the  corporation 
be  entirely  separated  from  any  connection  with  the 
corporations  to  which  the  properties  and  businesses 
now  in  the  combination  are  to  be  distributed. 


6 


That  appropriate  provisions  be  inserted  in  the  final 
decree  giving  force  to  the  foregoing  conditions,  by 
way  of  injunction  upon  all  parties  to  the  suit,  etc. 

Ill.  The  questions  of  the  capitalization  of  the  various 
corporations  among  which  it  is  proposed  to  distribute  the 
properties  and  businesses  now  in  the  combination  ;  as  to  the 
distribution  of  assets,  as  between  preferred  stockholders 
and  common  stockholders ;  and  as  to  the  amount  offered 
to  be  paid  or  distributed  to  the  holders  of  bonds  of 
either  class,  or  preferred  stocks,  are  submitted  to  the 
court  as  matters  concerning  the  stockholders  of  the 
corporations  and  the  bondholders  ;  the  Government 
being  concerned  merely  with  the  disintegration  of 
an  illegal  combination,  and  the  recreation  of 
competitive  conditions  under  such  circumstances  and  with 
such  safeguards  as  will  insure  the  continuation  of  such  com¬ 
petitive  conditions  and  prevent  a  recurrence  of  the  unlawful 
condition  found  by  the  court  to  exist  in  this  case. 

IY.  That,  by  the  final  decree  to  be  entered  herein,  it  be 
provided  that  the  defendants  named  in  the  petition,  their 
respective  officers,  directors,  agents,  servants,  and  employes, 
be  forever  ^enjoined  and  prohibited  from  continuing  or 
carrying  into  further  effect  the  combination  adjudged 
illegal  by  the  Supreme  Court,  and  from  entering  into  or 
forming  any  like  combination  or  conspiracy,  the  effect  of 
which  is  or  will  be  to  restrain  commerce  in  tobacco  or  its 
products,  or  in  articles  used  in  connection  with  the  manu¬ 
facture  and  trade  in  tobacco  and  its  products,  among  the 
states  or  in  the  territories  or  with  foreign  nations,  or  to 
prolong  the  unlawful  monopoly  of  such  commerce  obtained 
and  possessed  by  the  defendants,  as  ad j ridged  herein  in 
violation  of  the  Act  of  Congress  approved  July  2,  1890, 
either  : 

1.  By  causing  the  conveyance  of  the  physical 
property  and  business  of  any  of  the  corporations 


7 


among  which  the  properties  and  businesses  now  in  the 
combination  are  to  be  distributed  to  any  other  of  said 
corporations  ;  by  placing  the  stocks  of  any  one  or 
more  of  said  corporations  in  the  hands  of  voting 
trustees  or  controlling  the  voting  power  of  such 
stocks  by  any  similar  device  ;  or 

2.  By  making  any  express  or  implied  agreement  or 
arrangements  together  or  one  with  another  like  those 
adjudged  illegal  by  the  Supreme  Court  in  this  cause, 
relative  to  the  control  or  management  of  any  of  said 
corporations,  or  the  price  or  terms  of  purchase, 
or  of  sale,  of  tobacco  or  any  of  its  products,  or 
the  supplies  or  other  product  dealt  with  in  con¬ 
nection  with  the  tobacco  business,  or  relative 
to  the  purchase,  sale,  transportation  or  manu¬ 
facture  of  tobacco,  or  its  product  or  supplies 
or  other  product  dealt  with  as  aforesaid,  by 
any  of  the  parties  hereto,  which  will  have  a 
like  effect  in  restraint  of  commerce  among  the 
states,  in  the  territories  and  with  foreign  nations 
to  that  of  the  combination  the  operation  of 
which  is  enjoined  in  this  cause  ;  or  by  making  any 
agreement  or  arrangement  of  any  kind  with  any  other 
of  such  corporations  under  which  trade  or  business  is 
apportioned  between  such  corporations,  in  respect 
either  to  customers  or  localities  ;  or  by  any  of  such 
corporations  doing  business,  directly  or  indirectly, 
under  any  other  than  their  own  corporate  respective 
names  ;  by  refusing  to  sell  to  any  jobber  any  brands  of 
any  tobacco  product  manufactured  by  it  except  upon 
condition  that  such  jobber  shall  purchase  from  the 
vendor  some  other  brand  or  product,  also  manu¬ 
factured  and  sold  by  it ;  or 

3.  By  the  British-American  Company  and  the  Im¬ 
perial  Company  employing  a  common  agent  for  the 


the  purchase  of  leaf  tobacco  in  the  United  States,  or 
by  either  of  said  two  companies  uniting  with  any  of 
the  corporations  among  which  the  properties  and 
businesses  now  in  the  combination  are  to  be  dis¬ 
tributed,  in  the  employment  of  a  common  agent  for 
the  purchase  of  tobacco  leaf  ;  or 

4.  By  transferring  to  and  vesting  in  any  of  the  cor¬ 
porations  among  which  the  properties  and  businesses 
now  in  the  combination  are  to  be  distributed,  any 
part  of  the  stock  of  the  United  Cigar  Stores  Com¬ 
pany  ;  or 

Wherefore  the  United  States  prays  the  court  that,  in 
connection  writh  any  plan  or  method  of  dissolving  the  un¬ 
lawful  combination  of  the  defendants  found  by  the  Su¬ 
preme  Court  to  exist  in  this  case,  and  of  recreating  out  of 
the  elements  now  composing  it,  a  new  condition  which  shall 
be  honestly  in  harmony  with  and  not  repugnant  to  the  law, 
which  this  court  may  ascertain  and  determine  upon  and  in 
the  final  decree,  to  be  rendered  in  this  cause,  the  foregoing 
requests  and  suggestions  be  adopted  and  embodied. 

Henry  A.  Wise, 

United  States  Attorney  for  the  Southern  District 

of  New  York. 


[6833] 


